European Public Finances and the Great Recession: A Comparison of France, Germany, Ireland, Italy, Spain and the United Kingdom

We compare the economic trends observed during the financial crisis, as well as the fiscal and social reforms implemented in response to it, across six European Union countries. It appears that countries where the crisis led to a relatively larger increase in public spending than the fall in tax revenue – in particular France and Italy – have implemented fiscal consolidation measures relying more on tax increases than on spending cuts.
Whilst in Italy, households with children were less affected by the tax and social reforms than households on pensions, the opposite is true in Ireland and the United Kingdom. The nature of the cuts to public services also varies: France, Ireland and the United Kingdom have chosen to maintain spending on health and education, whilst Italy and Spain have opted for relatively substantial cuts in these areas.
One notable improvement has been the introduction of greater independence and transparency in the preparation of economic and budgetary forecasts. Unfortunately, in many cases, the fiscal response to the crisis failed to seize opportunities to improve the overall efficiency of the tax system.